Cloud computing does to IT what Toyota did to car making

Erich Clementi, a senior vice-president at the $107 billion International Business Machines Corp., better known as IBM or Big Blue, heads its global technology services (GTS) division— the world’s largest information technology (IT) services business by revenue. He drives the company’s initiative to converge digital and physical infrastructure, branded Smarter Planet, which involves making cities smarter with sensors and chips. He also heads the company’s analytics and cloud computing initiatives.

During a visit to Mumbai last week, he said IBM is sharpening its focus on the use of innovative technologies and solutions to manage the growing demands on infrastructure that delivers vital services in cities. For instance, it deployed a system in Konkan Railway to help the facility manage, analyse and maintain train running information, schedules and reduce passenger delays…


Clementi also highlighted the increasing importance of analytics for companies to maintain their competitive edge while touching upon the role of Watson, IBM’s artificial intelligence computer system, capable of answering questions in natural language. Edited excerpts:

With the nature of IT services changing, what is GTS doing differently?

GTS is the largest unit of IBM and has the same strategic focus areas as the parent which has committed a $20 earnings per share to our shareholders by 2015. We will do this by focusing on four company-wide focus areas—Smarter Planet; analytics; a change in our delivery model to cloud computing (a metaphor for Internet- or network-based computing); and serving growth markets like India. It is a very important market to us since it’s a very fast growing market. India is also a place for talent. We have a strong footprint in India, particularly in services we use for delivery.

The services market has been undergoing change. Between 2000 and 2005, most of our business was driven by mega deals. We had an ad hoc, single delivery model for large accounts. But we recognized it was not very scalable and hence made a huge investment in standardizing our global delivery framework. Since 2008, we began increasing the level of automation and engineering in our solutions. We invest to be ahead in these models since it influences whether you can get decent margins or end up with commoditized business.

Give us some examples of these new models.

Consider this. How does one deal with the flow of data that is created by millions of telecom subscribers? If you deliver services to solve this problem, you will never have a commoditized business. Also look at the mobility business. You simply need to look at the performance of personal computing or PC manufacturers to understand what the shift from PCs to handsets and tablets has done to their business.

I’m happy that we sold our PC business to Lenovo in 2005. Companies that have stuck to PCs are in a little bit difficult situation. After we sold our PC business, we have been focusing on infrastructure management, application management, solutions for delivery platforms to include support for mobility and analytics to understand billions of call records to help telecom companies avoid churn in the customer base. When you come with such value propositions, you commit yourself to a business outcome and that makes you very difficult to substitute.

How do you view the shifts in the global IT outsourcing environment?

In the long term, IBM is betting on concepts like Smarter Planet which will involve sensors, chips, infrastructure, etc. This is a long-term business.

The customers are inundated with data, and helping them harvest that data intelligently also is a long-term business. Cloud computing helps us provide all these businesses as a service anywhere.

Are you betting on non-linear (other than headcount) businesses?

Non-linear business is the holy grail of IT services because it’s very difficult to scale up a business that is just based on bodies (read manpower). Intellectual property (IP), whether software, applications, tools or extreme automation like on the cloud, is clearly very beneficial to the economy and delivery.

Cloud computing does to IT what Toyota did to the car-manufacturing process—a disciplined application of engineering to the supply chain of IT. Hence, IP is very important. Look at how companies struggle to acquire other businesses to get an IP portfolio. Given our investment in R&D (research and development, we can cover a lot of these capabilities.

What do you make of the buzz around social media?

As enterprises increasingly start relying on social media, security and management becomes very important. That’s where we come. There’s also enormous value in analysing the data generated by social media, especially if you want instant feedback.

Our research division has the largest contingent of math PhDs in the industry. This helps us tackle anything from computational biology to predictive analytics. No company on the planet has invested as much as IBM has done in analytics.

How does your artificial-intelligence computer Watson fit into the picture?

Watson is a learning machine. You can feed it with knowledge and it will organize, interpret and answer questions. We are training Watson as a doctor in the healthcare sector for claims processing. We are experimenting whether Watson can authorize treatments automatically, and discover or help discover the diagnosis and connections in oncology.

Just last week, we announced that Watson has gone to Wall Street to learn how to be a stock broker. The Watson technology is applicable to any field where you need to make decisions on evidence of data. You will see that system finding its way into a whole host of applications which will be delivered as a cloud service.

When do we see Watson services being integrated in developing countries such as India?

We will need another couple of years to produce these applications, and then we will see where we stand. However, if you believe the predictions of our research team, you will be seeing a lot more of Watson in our lives by 2020.